60 seconds with Sue Noffke on market impact of Brexit vote

The referendum result comes as a surprise and markets will look to policymakers to provide stability.

06/24/2016

Sue Noffke

Fund Manager, UK Equities

It is a shock for markets – the result was not one that was anticipated. We’ll see an unwinding of the rises we’ve seen in markets in the past five days, and some more.

What it means in terms of economies is a shock to growth. We’ve seen a significant fall in sterling – that’s going to have major impacts for UK equity companies but also people’s appetite for risk. We might see a downgrade to debt in the UK and all these things are going to be working through.

Sector winners and losers

We’ll see winners and losers in the markets – the losers are likely to be financials, consumer stocks, particularly housebuilders, and retail stocks, and the FTSE 100 is very international, so some of the stable, more international facing companies will be relative beneficiaries in what is likely to be a very difficult market today and in the immediate future.

Seeking stability

I think markets are going to be looking for stability and action from policy makers – particularly central banks. Much is up in the air, but we are likely to see Mark Carney and other central banks, not just the Bank of England, provide liquidity to markets and look to really comfort investors with some actions probably around quantitative easing, possibly some unprecedented moves around fiscal stimulus, but very much co-ordinated action.

We’re going to see interest rate rises off the cards, particularly in the US but also here in the UK in the immediate aftermath.

We continue to survey opportunities for the longer term, for clients’ best interests.

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The views and opinions contained herein are those of Schroders’ investment teams and/or Economics Group, and do not necessarily represent Schroder Investment Management North America Inc.’s house views. These views are subject to change. This information is intended to be for information purposes only and it is not intended as promotional material in any respect.

The UK choosing to leave the EU comes as a major shock for investors and uncertainty will remain high for some time. In the near-term, the UK is likely to experience a stagflationary period of lower growth but higher inflation.

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